Critical Tips for Buying the Right Vacation Home in Retirement

Critical Tips for Buying the Right Vacation Home in Retirement

Image via Pexels; Article by Suzie Wilson

You’ve wanted to buy a vacation home for many years. Now that you’re in your golden years, you feel it’s time to realize your dream. While purchasing a second home can add joy and relaxation to your life, you should thoroughly prepare because it’s a significant investment.

Not only do you need to find the right home in the right location, but you also must factor in the costs and determine whether or not you will rent it out. Below, Dagmar Sands presents a few essential tips for navigating the vacation home buying process.

Establish your priorities

Your first step will be to determine whether you want to purchase a second home to use for yourself, rent it out, or both. What are your long-term goals? Do you plan on spending most of your time traveling during the first few years of retirement? Would it be better to buy your second home in three or four years? Moreover, if you wish to turn the property into a vacation home, you will want to make sure you can stick with it for the long haul.

Run through the costs.       

Even if you are comfortable with your financial standing, you will want to consider all the costs of purchasing a vacation home. This will help you know how much of a loan you’ll need when you approach lenders. Don’t forget that you’ll likely need to put down 20 percent or more on a mortgage for an investment property or second home, so you’ll need to factor in that cost as well. Vacation Property Online notes that this is a significant investment that could cost you as much (if not more) as your primary residence. With the purchase price of any property you consider, think about the upfront renovations and upgrades you may want to make.

Also, don’t forget that you will need to cover routine maintenance, repairs, cleaning, gardening, security, HOA fees, insurance, taxes, and other expenses. Much of your costs will depend on where you buy the home. Having a firm grasp on what expenses to expect will help you develop a good strategy.

Consider renting out your property.         

Many retirees choose to make their second home an investment property. Along with providing you with a steady income stream, owning an investment home is one of the most tried-and-true methods of diversifying a portfolio. Even if you want to spend a good chunk of the year with your family in the new home, you could rent it out for the other weeks and months.

You will want to establish a legal structure if you rent out your vacation home. You can limit your liability to protect yourself and your assets and receive tax advantages by forming an LLC. You will want to hire an attorney or go through a formation service to ensure your LLC complies with your state’s regulations. Plus, it will save you a significant amount of time and stress.

Choose a location.     

Many seniors purchase vacation homes in a location they are already familiar with. If you go this route, you can just sit back and relax, knowing that you have found the perfect getaway for yourself and your family. If you adore a specific beach, mountain, or lake area, consider it for your vacation home location.

If you are thinking about buying a property in an area you are unfamiliar with, you will need to spend time researching the location and potential properties. It can even help rent a home for a short period to get a feel for the area and the people living together. Whether you are using the second home only for your family or your plan to rent it out, you will want to ensure it has excellent dining, shopping, and other attractions within a reasonable proximity.

Remember the tax implications.      

If you rent out your vacation home for more than 14 days per year, you are required to report all income. But Nationwide points out that you can also deduct various expenses. Talk to your CPA about local and state tax laws that will impact your vacation buying and managing process. And be sure to factor in all tax implications when budgeting for your purchase.

If now is the time to make your vacation home dreams come true, make sure you go at it with a strategy. Consider the tips above as you navigate the decisions in front of you. The more prepared you are, the more you will enjoy this special time in your life!

The Dagmar Sands Blog features the thoughts of real estate pro Dagmar Sands of Real Estate International, Inc. and her newest listings. Reach out to Dagmar today to learn more! 404-313-3456 dagmar@worldclassrealestatebroker.com